The construction market in Bulgaria is expected to shrink in 2009 after an impressive growth between 2005 and 2007, a report says.

The economic climate in construction declined significantly in Q4 2008 and Q1 2009 and returned to the level seen in the years 2002-2004, according to the latest report from PMR, a market research company, entitled "The construction market in Bulgaria 2009. Development forecasts for 2009-2011".

"The liquidity of construction companies is very low, and barter payments are becoming common," says the report. According to it the construction industry will suffer from the withdrawal of many external investors from the property market.

"At present many projects at the point of negotiation with contractors have been brought to a halt. In addition, investors in apartments and residential areas have been delaying their payments to contractors."

The Bulgarian residential market is suffering a slowdown, which became apparent in the final months of 2008, the research shows. New buildings and sales of flats were strongly affected by the financial limitations imposed by the banks. At the moment the number of mortgages approved by the banks in Bulgaria is falling by 80% on an annual basis, and the banks are now offering mortgages of only up to 70% of the value of the property.

Holiday homes are a prominent factor with regard to the anticipated decline in the residential arena, as most of the clients came from the countries hardest hit by the crisis, such as the UK and Ireland.

The non-residential arena will also suffer from the financial crisis, as the largest projects which were supposed to have started this year have been postponed until an improvement has been seen, the report says. Of 20 malls and shopping centres announced for Sofia, fewer than half have a realistic chance of being built, and even these are not very likely to begin in 2009. The two largest projects in the non-residential arena, worth EUR 700 M, have been cancelled, and this will definitely have an adverse effect on the market.

The situation is similar with regard to office building. There are very few projects being built at the moment, and the total area does not exceed 230,000 m², despite the fact that at the beginning of 2008 it was expected that more than 800,000 m² would be opened by the end of 2010. Another interesting trend is that of re-renting offices with the sole purpose of cutting costs.

The logistics and industrial areas have been much less severely affected by the crisis.

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